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Deterrence, Reputations, and Competitive Cognition

Author

Listed:
  • Bruce H. Clark

    (College of Business Administration, Northeastern University, Boston, Massachusetts 02115)

  • David B. Montgomery

    (Graduate School of Business, Stanford University, Stanford, California 94305)

Abstract

This study examines an aspect of competitive interactions that has attracted increasing research attention: the relationship between deterrence and competitive reputations. We build a conceptual model of the antecedents and consequences of a firm's reputation for being a credible defender of its markets. Theory and limited empirical evidence suggests a firm with this reputation should deter competitive attacks against it. We explore how a manager's competitive cognition about her opponents' (1) patterns of activity in the marketplace and (2) previous success can lead her to perceive a competitor as a credible defender. We test the framework using MBA students in a quasi-field setting, the Markstrat2 simulation game. The results of this study suggest that reputation deters attack only when the potential attacker considers the target firm a minor competitor. Managers consider defenders that have previously been successful as credible defenders of their markets. They also weigh consistency of activity relative to industry average in making inferences about credibility. The study indicates that the deterrence-reputation link is more complex than previous theory and evidence might imply, and suggests considerable promise for a psychological approach to examining competitive interactions.

Suggested Citation

  • Bruce H. Clark & David B. Montgomery, 1998. "Deterrence, Reputations, and Competitive Cognition," Management Science, INFORMS, vol. 44(1), pages 62-82, January.
  • Handle: RePEc:inm:ormnsc:v:44:y:1998:i:1:p:62-82
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    File URL: http://dx.doi.org/10.1287/mnsc.44.1.62
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    References listed on IDEAS

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    Cited by:

    1. repec:bla:stratm:v:38:y:2017:i:11:p:2147-2167 is not listed on IDEAS
    2. Upson, John W. & Ranft, Annette L., 2010. "When strategies collide: Divergent multipoint strategies within competitive triads," Business Horizons, Elsevier, vol. 53(1), pages 49-57, January.
    3. Konstantinos Pitsakis & Vangelis Souitaris & Nicos Nicolaou, 2015. "The Peripheral Halo Effect: Do Academic Spinoffs Influence Universities' Research Income?," Journal of Management Studies, Wiley Blackwell, vol. 52(3), pages 321-353, May.
    4. Basir, Nada & Beyhaghi, Mehdi & Mohammadi, Ali, 2014. "The Fate Of Patents: An Exploratory Analysis Of Patents As Ipo Signals Of Reputational Advantage," Working Paper Series in Economics and Institutions of Innovation 348, Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies.
    5. Morgan, Neil A. & Clark, Bruce H. & Gooner, Rich, 2002. "Marketing productivity, marketing audits, and systems for marketing performance assessment: integrating multiple perspectives," Journal of Business Research, Elsevier, vol. 55(5), pages 363-375, May.
    6. Claussen, Jörg & Kretschmer, Tobias & Spengler, Thomas, 2010. "Backward Compatibility to Sustain Market Dominance – Evidence from the US Handheld Video Game Industry," Discussion Papers in Business Administration 11499, University of Munich, Munich School of Management.
    7. Claussen, Jörg & Kretschmer, Tobias & Spengler, Thomas, 2010. "Market leadership through technology – Backward compatibility in the U.S. Handheld Video Game Industry," Discussion Papers in Business Administration 12716, University of Munich, Munich School of Management.
    8. repec:eee:ijrema:v:28:y:2011:i:2:p:89-101 is not listed on IDEAS
    9. Kim, Jai-Beom & Kim, Jai-June, 2000. "Reputation and international technology transfer: a comparative study of Japanese, European and American corporations in Korea," International Business Review, Elsevier, vol. 9(5), pages 613-624, October.
    10. repec:bla:stratm:v:38:y:2017:i:11:p:2237-2254 is not listed on IDEAS
    11. Anastasios Karamanos, 2002. "Market Networks and the Value in Knowledge Exchanges: Evidence from Biotechnology Strategic Alliances," Working Papers wp240, Centre for Business Research, University of Cambridge.

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